Ronald Coase, who was awarded the Nobel Prize in Economics in 1991, argued in his “Nature of the Firm” that firms arise because individuals cannot create the same production levels if everyone operates as single individuals. Firms serve a role in a given supply chain, they are each a vital link in the chain, and are configured in order to create the products and services which consumers eventually purchase. In highly verticalized companies, such as John D. Rockefeller’s Standard Oil, there is a great level of self-sufficiency and little need for other firms. However, market and regulatory factors seem to eventually override this scenario.
It is inevitable that commercial contracts, those between two (or multiple) commercial entities – contrasted to employment contracts, will arise. When a commercial contract arises, there is also a commercial relationship and the other elements of Commercial Management. Commercial Management is the integration of commercial strategies, commercial processes, commercial contracts/tools and commercial relationships. Accordingly, effective Commercial Management is vital for the success of any company or public-sector entity, or the Firm.
This all leads to the question, “Who in a Firm is involved in Commercial Management?”. The answer is nearly everyone. The same could be said for the question, “Who is involved with Human Resource Management?” – with the answer being, nearly every manager and employee.
Once we recognize that nearly everyone in the Firm has a role in Commercial Management, with the exception being those who never directly nor indirectly interact with a supplier/contractor nor a customer/client, each of us must ask, “What is my role?”.
Admitting and recognizing that we have an opportunity, and asking what we can do about it, is key. Without that realization, solutions and value will not be sought. In this era of Commercial Management delivering less than full yield, the return on investment arising from this admission and recognition will be significant. So, we must all ask ourselves, “Am I involved in Commercial Management?”, and then admitting the answer is “Yes”.
Nearly everyone in the Firm can help elevate the yield from Commercial Management – the question then becomes, “How?”.